If you have ever considered investing in Alphabet, the parent company of Google, you have probably noticed that it is trading under two different ticker symbols: and. Which is the better buy? Is there a difference between the two? And how does Alphabet fit in exactly?
Short history of Google
Google was founded in 1998 by Larry Page and Sergey Brin, who were both PhD students at Stanford University at the time. Originally a search engine only, the company operated from a friend’s garage before the couple was able to raise about $ 1 million dollars in seed money, before moving to their original headquarters in Menlo Park, California.
Together with the internet, the company grew rapidly. Google went public on August 19, 2004. At the IPO, it offered around 19.6 million shares for $ 85 each, giving it an initial market capitalization of $ 23 billion. Two years later, in 2006, Google expanded video when it bought YouTube for $ 1.65 billion in Google shares.
Since then, Google has also ventured into other areas. It is now active in various internet and non-internet related industries. Among other things, it operates a venture capital fund, a research laboratory for life sciences research and an autonomous driving company.
The Rise of Alphabet
In 2015, as part of a restructuring, a legal entity named Alphabet was established to serve as a parent company for Google and the group’s other subsidiaries.
Today, Alphabet is a multinational conglomerate in Mountain View, California, and one of the largest companies in the world. The share is part of millions of portfolios and Alphabet is a leading company listed on the leading US stock index, the. This is what you need to know about the shares before you invest.
Why are there two Google tickers?
The primary reason for the distribution of GOOG / GOOGL has to do with voting rights. In general, shareholders have the right to vote on important issues raised by a company’s board of directors, which would have an impact on the way the company functions.
To ensure that the company’s founders retain control of the company, Google split the publicly traded share into two: class A GOOGL shares and class C GOOG shares. The strategy behind the move is simple: owners of GOOGL shares have one vote per share, while owners of GOOG have no voting rights. That is why GOOGL shares are generally a little more expensive than GOOG shares.
Are there class B shares?
There is indeed a third class of shares, class B. However, these are held exclusively by the founders. Each share in this class has 10 votes per share, guaranteeing a de facto veto right for Page and Brin with every decision. If Alphabet B shares were available for purchase on the open market, there would probably be a much larger price difference for these shares compared to class A and C shares.
So how does Google make money?
Google’s parent company, Alphabet, primarily generates revenue through advertisements, sales of apps, in-app purchases and products for digital content via the Google Play Store and hardware such as the Pixel telephone line . In addition, the company charges license fees and service charges for products such as Google Drive and its Google Cloud offering.
However, most of Alphabet’s revenue comes from advertising on its platforms. The company sells banners on many online websites and displays paid results for Google searches. Google is currently considered the leading player in online advertising and the total revenue in 2018 amounted to more than $ 136 billion.
Which other companies have the alphabet?
Alphabet is the parent of many companies other than Google. Here are a few:
Calico – A biotech company focused on combating old age and related diseases
GV (formerly Google Ventures) – the venture capital arm of Alphabet
CapitalG – A growth-oriented equity fund that invests in small companies around the world
Verheugen – Alphabet & # 39; s research organization dedicated to the study of the life sciences
Waymo – An autonomous (self-managing) car development company
Nest Labs – A home automation company
X – Department dedicated to computer science research and development
Sidewalk Labs – Urban innovation company that wants to create smart cities
Google Fiber – Offers broadband internet and IPTV in a small but increasing number of locations
Who are the largest shareholders of the alphabet?
It is not surprising that owners, Larry Page and Sergey Brin, are now the largest shareholders in Alphabet. Both own around 20 million class B shares, as well as 20 million class C shares. Their net worth is estimated at more than $ 50 billion dollars each.
Eric Schmidt, the CEO of Google, holds 8 million shares between 2001 and 2017, 4 million category B shares and an equal number of class C. shares. Vanguard leads institutional investors with a total of more than 40 million Alphabet shares in in total, divided between and A and C, followed by Fidelity Management and the BlackRock Fund, which hold 26.9 and 25.1 million shares, respectively.
Which alphabets should I buy?
It depends on whether you are interested in voting rights. The two share classes move in the same direction and respond to events in the same way, so in the long run your returns will not be affected by which category of shares you choose to buy. If you intend to actively participate in shareholders’ meetings and the decision-making of the company, you must of course invest in class A shares.
If you are happy to come along, or if you are not interested in expressing your opinion, stay with Class C shares.
